Making the move to aged care can be a complex process. The government's My Aged Care website is designed to give residents a clear understanding of what it will cost to live in an aged care facility – the website even allows you to compare the features and cost of facilities against one another. It sounds great, but it's not quite that simple. The problem is that it can't disclose every fee and charge you may be liable for.
Let's start with what it will tell you.
My Aged Care will provide information about the market price accommodation payment across different rooms within each facility, listing the cost both as a lump sum payment (known as refundable accommodation deposit or RAD) and as a daily charge (known as a daily accommodation payment or DAP). All good to know.
You will also be given information about extra service fees that may apply. These cover the cost of a higher standard of accommodation and lifestyle services, such as wine with meals, hairdressing or Foxtel. However, in many cases you will find that the extra service fee on My Aged Care is shown as zero.
Now we're moving on to what the site doesn't tell you. It is absolutely vital to speak to the facility you are considering, as you often find that there are other fees and charges.
Rachel Lane, of Aged Care Gurus, a network of advisers who specialise in advice to aged care residents and their families, points out, "If you just looked at the information on My Aged Care, it would be easy to underestimate your costs by a substantial amount, such as $25,000/year. This is because some fees are set by the facilities themselves, and these fees vary from one to another, and may be complex."
When it comes to the cost of accommodation, a number of the aged care groups have introduced extra payments for residents who pay for their cost of accommodation by lump sum (RAD). Why? Because if the resident chooses to pay by daily charge the operator receives an effective interest rate of 6.28 per cent.
Let's start with some simple examples. At one group of facilities residents who choose to pay a RAD are charged a "capital refurbishment fee" of a flat $10/day; another levies an "asset replacement contribution fee" of $18/day. In both cases the fees apply for as long as you stay in the facility, and you can have the fee deducted from the lump sum you paid, if you choose to. So if you stay in the first facility for a year it will cost $3650 but if you stay in the other it will be $6570. For five years it will cost $18,250 in the first and $32,850 in the other.
In some cases the fees are capped or applied pro-rata. These are harder to understand, though may turn out to be better value for you. For example, one group has an asset replacement contribution of $13.70/day charged for a maximum of 2.5 years, pro-rata based on the amount you pay by lump sum. So if the market price was $400,000 and you paid half by lump sum and half by daily payment then your asset replacement contribution would be $6.85/day, and if you stayed there for 2.5 years it would be capped at $6251; if you paid entirely by RAD it would cost $12,501 over 2.5 years.
The other group of fees that you need to be aware of relate to "additional services", which are a lot like "extra services" but are set by the facility, don't require government approval, and therefore don't appear on My Aged Care. These services are often delivered as a package and called things like "wellness services" or "lifestyle services". Again, these fees and charges vary considerably from one place to another. For example, at one aged care facility there is a "wellbeing package" at a cost of $45/day, which includes a flat screen TV in your room, weekly hairdressing/manicure, a choice of meals and wine with meals, daily newspaper, a companion or transport service for an hour a week and a weekly physio treatment. At another the "club services" cost $100/day and include personal telephone, TV, individually controlled room temperature, a wide range of food and beverages and various beauty and spa treatments.
In both of these cases the additional services are compulsory – whether you use all of them, some of them or none of them you pay the extra daily fee. At other facilities the additional services are provided on an opt in/opt out basis – that is, you pay for what you use. Like most things, if you use all of the services in the package it is normally cheaper to pay for them as a package than to buy each component individually.
Aged care has always been a complex area, but it is getting harder, not easier, to navigate. Seeking advice from someone who specialises will ensure you know what it costs and the best way to pay for it.
Read more: http://www.smh.com.au/money/planning/variation-in-fees-and-charges-mean-my-aged-care-might-underestimate-your-costs-20160629-gpuzln.html#ixzz4DO6XJ8rx
Follow us: @smh on Twitter | sydneymorningherald on Facebook